U.S. Contractor in Iraq Admits Paying $2 Million in Bribes

WASHINGTON — A contractor in Iraq has pleaded guilty to providing money, sex and designer watches to U.S. officials in exchange for more than $8 million in reconstruction contracts, federal officials announced Tuesday.

Philip H. Bloom faces as much as 40 years in prison after admitting to paying more than $2 million in bribes to U.S. officials with the Coalition Provisional Authority, which ruled Iraq after the American invasion in 2003.

Bloom's guilty plea on bribery and money-laundering charges is the latest development in a widening corruption scandal centered on a network of U.S. civilians and military officials who worked out of a coalition outpost in the south-central Iraqi town of Hillah. Under terms of the plea agreement, Bloom must pay $3.6 million in restitution and forfeit $3.6 million in assets.

"Oversight works," said Stuart W. Bowen Jr., the special inspector general for the reconstruction of Iraq, who carried out the investigation with the Department of Justice, which is prosecuting the corruption cases. The guilty plea "sends a signal to other potential wrongdoers that we have yet to uncover."

According to court filings, the scheme began in January 2004, when Bloom began paying bribes to Robert J. Stein, a civilian contractor who controlled $82 million in reconstruction funds as the comptroller for the coalition's headquarters in Hillah. Stein, who had a previous conviction for fraud when he was hired, pleaded guilty to accepting bribes and other charges in February.

Stein funneled money and favors from Bloom to other officials in Hillah, all of whom helped direct contracts to a group of companies controlled by Bloom, according to court filings. Two officers in the U.S. Army Reserve, Lt. Col. Michael Wheeler and Lt. Col. Debra Harrison, have been arrested in the case. Officials expect more arrests to come as Bloom cooperates with investigators.

From January to June 2004, when the coalition government ended, Bloom provided Stein and the officers with first-class plane tickets, real estate lots, weapons, new SUVs, cigars, Breitling watches, jewelry, alcohol, sexual favors from prostitutes kept at Bloom's Baghdad villa and cash bribes, according to court documents.

In return, Bloom's company, Global Business Group, received $8.6 million in contracts to refurbish a police academy in Hillah, a library in Karbala and other reconstruction projects. In some cases the work was never done, and in other cases it was shoddy, according to audits by the inspector general.

The contracts were paid with Iraqi funds held in the Development Fund for Iraq, which has been at the center of many of the corruption scandals in Iraq. One audit determined that the coalition government, which was run by L. Paul Bremer III, could not properly account for the disposition of almost $9 billion from the development fund.

Although the Hillah case involves smaller amounts of money, the alleged conspirators were particularly brazen. In one e-mail cited in court papers, Stein tells Bloom, "I love to give you money." In another, he tells Bloom that he anticipates a "very properious [sic] future."

Bloom's lawyers declined to comment Tuesday, though they said they planned to ask for Bloom's release this week. Bloom has been in custody since being arrested at the Newark, N.J., airport this year.